Marty Fridson is a dividend investment specialist and editor of Fridson/Forbes Income Securities Investor; he looks to Plains All American Pipeline (PAA) as a Top Pick for the coming year.
Plains All American has investment grade ratings (Baa3/BBB-), raised from Ba1 by Moody’s a little over a year ago. That upgrade reflected a reduction in debt leverage that’s expected to continue in 2023.
PAA is a master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids, and natural gas. Its indicated yield has recently been in the 7% range.
Distributable cash flow at the end of Q3 was strong, covering the common distribution by 2.65 times. In 3Q 2022 PAA reported adjusted net income of $280.0 million, up 35% from a year ago on increased gathering volume and higher energy prices.
This issue is suitable for low- to medium-risk taxable portfolios. Note, as a tax accounting matter, that his MLP issues a K-1 to investors. Buy at $16.50 or lower for a 5.27% annualized yield.
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